Implications For Consumer Welfare Research Articles

EXPRESS: Rejections Are Stickier than Choices

Consumers frequently make the same decision repeatedly, by either choosing the products they like more or rejecting the products they like less. Holding everything else constant, does the mere act of choosing versus rejecting influence the extent to which consumers seek variety? Eight studies ( N = 2,814) identify a robust effect: consumers tend to seek less variety across repeated decisions if they make each decision by rejecting than if they make each decision by choosing. This effect occurs because an initial rejection (vs. choice) reduces the liking of the unselected option(s) and thus widens the liking gap between the selected and unselected options. An increased liking gap, in turn, decreases the consumer’s likelihood of selecting a previously unselected option(s) in subsequent decisions. We also show that the enlarged liking gap is driven by increased negative inferences about the unselected option(s). Theoretically, this research extends the literatures on variety seeking and choosing versus rejecting. Practically, it offers implications for consumer welfare: the rejection task can improve (worsen) the decision quality in situations in which consumers typically seek too much (too little) variety.

Unfair competition law in Ghana: unravelling the scope, evolving jurisprudence, challenges and future directions

Abstract Despite its implications for businesses and consumer welfare, unfair competition law has received limited scholarly attention in Ghana. This article fills a significant research gap by examining Ghana’s legal framework for unfair competition, focusing on legislative measures and court decisions in an attempt to facilitate comprehensive academic inquiry into the subject. The article explores how Ghana addresses unfair competition in line with international standards, particularly Article 10bis of the Paris Convention and the Trade-Related Aspects of Intellectual Property Rights Agreement. It assesses how Ghanaian courts have developed unfair competition protection jurisprudence over time with co-existing statutory and common law regimes. Additionally, it highlights the challenges in applying the law and areas for improving it. The study demonstrates how Ghana adopts various approaches to unfair competition, comprising a single source statutory reference point which coexists with the common law tort of passing off. The statutory approach, alone or with the other approaches, meets Ghana’s international obligations. However, there is a need for coherence and effectiveness in the interaction between statutory law and common law principles. Understanding this interaction is essential for ensuring Ghana’s consistent and effective application of unfair competition laws.

Keep It Simple? Consumer Perceptions of Brand Simplicity and Risk

Evoking simplicity in marketing communications has become popular among marketing practitioners, but little is known about its effects on consumers and firms. The current work focuses on consumers’ perceptions of the simplicity or complexity of brands and a previously overlooked consequence of those perceptions. Results from six experiments and analysis of a proprietary customer satisfaction dataset from Consumer Reports (N = 147,600) show that when consumers think brands are simple, they judge them to be less likely to experience product or service failures. Although these lower risk judgments could be positive for brands, they can also lead consumers to punish simpler brands more in the event of failures. Results also suggest that consumers’ simplicity/complexity perceptions reflect the dimensionality of their mental representations of brands, and the relationship between simplicity and lower risk is attenuated when additional brand dimensionality is framed in terms of redundancy. The findings cast doubt on the degree to which evoking simplicity is a uniformly positive marketing strategy and encourage practitioners to more thoughtfully consider simplicity's implications for consumer and firm welfare.

CONSUMER BEHAVIOUR AND DECISION MAKING IN HEALTHCARE PURCHASES

In the complicated healthcare environment of today, obtaining health insurance is essential to guaranteeing both financial stability and access to high-quality medical care. However, there are still many unknowns when it comes to consumer behaviors while choosing health insurance, which affects market dynamics and decision-making procedures. By combining knowledge from the fields of economics, psychology, marketing, and public policy with a thorough investigation of consumer behaviors in the healthcare insurance market, this study seeks to close these gaps. The research attempts to elucidate the elements influencing decision-making, the complexities of choosing insurance, and the implications for market dynamics, consumer welfare, and policy development through theoretical investigation, empirical analysis, and practical implications. Important conclusions highlight the need for focused marketing and governmental interventions by revealing the intricate interactions between social, marketing, and personal aspects in decision-making. The study emphasizes how crucial decision support tools and consumer education are to enhancing consumer comprehension and decision-making. Furthermore, it highlights how important it is to have regulatory frameworks that support competition, consumer welfare, and market efficiency that are based on a deeper understanding of consumer behaviour. Through the utilisation of these insights, interested parties can endeavor to establish a healthcare insurance market that is reasonably priced, easily accessible, and adaptable to the various requirements of people and communities, guaranteeing access to top-notch medical care while upholding financial stability. Key Words: health insurance, consumer behaviours, decision-making, market structure, policy formulation, safety of consumers, regulatory frameworks, affordability, access, quality care.

Behavioral economics and consumer protection in the U.S.: A review: Understanding how psychological factors shape consumer policies and regulations

This study explores the integration of behavioral economics into consumer protection policies, focusing on the influence of psychological factors on consumer behavior and the implications for market efficiency and consumer welfare. Employing a systematic literature review and content analysis, the research scrutinizes peer-reviewed articles, policy reports, and case studies from 2008 onwards to identify the impact of cognitive biases and heuristics on consumer decisions and the effectiveness of behavioral interventions in enhancing consumer protection. The methodology hinges on a comprehensive search strategy, with inclusion and exclusion criteria meticulously applied to ensure the relevance and quality of the literature reviewed. Key findings reveal that psychological factors significantly affect consumer choices, often leading to outcomes that deviate from optimal welfare and efficiency. Behavioral economics, through its insights into consumer behavior, offers innovative approaches to policy-making that can mitigate these effects, enhancing consumer protection and market functionality. The study identifies challenges and opportunities in the evolving landscape of consumer protection, emphasizing the need for adaptive regulatory frameworks and the potential of digital technologies to understand and influence consumer behavior. Final recommendations advocate for dynamic policies, consumer education, and collaboration among stakeholders to address emerging consumer risks effectively. The study concludes that behavioral economics holds transformative potential for consumer protection, urging continued exploration and innovation in policy development to safeguard consumer interests in a rapidly changing market environment.

Out of sight, out of mind: When and how perceived vulnerability decreases foreseeability and responsibility for causing harm in the marketplace.

Numerous social categories are often seen as vulnerable to harm. In the context of firms causing harm to individuals, we seek to better explain when and why observers absolve firms of responsibility as opposed to holding them more accountable. We propose that when someone's identity is thought to make them vulnerable to harm, identity visibility (how observable the identity is) and frequency (how common the identity is) influence the perceived foreseeability of a harmful event and firm responsibility. Across five studies (total N = 2,101), we find that when visibility and frequency are low, perceptions of foreseeability decrease, in turn decreasing firm responsibility. We illustrate how visibility and frequency, and in turn foreseeability, can vary based on the characteristics of the individual being observed (e.g., the visibility or rarity of a health condition) or context (e.g., an otherwise visible identity may be invisible in an online service context). Foreseeability and firm responsibility increased when the harmed individual's rare health condition was reframed to communicate the firm's likelihood of interacting with any individual with the same health condition. Implications for consumer welfare, policy, and inclusivity are discussed. (PsycInfo Database Record (c) 2024 APA, all rights reserved).

Transactional fairness in consumer markets

Abstract There is growing public concern about the ‘unfairness’ of many pricing practices that have become common in consumer, particularly digital, markets. Industrial and behavioural economists have developed theories that explain the conditions under which these practices are profitable for firms, and their implications for consumer welfare. We identify a mismatch between the welfare economic principles used in this theoretical work and the normative perspective in which these practices are viewed as unfair. We develop a concept of ‘transactional fairness’, grounded in the normative approach of Sugden's Community of Advantage, that is reflective of public concerns. Transactional fairness is complementary to established criteria of economic efficiency and distributional equity but is based entirely on the relationship between individual buyers and sellers. It establishes clear principles with realistic information requirements that are appropriate for compliance by firms. Regulation based on this approach can help to restore public faith in markets.

The effects of targeted digital advertising on consumer welfare

ABSTRACT Prior research has focused on societal and regulatory issues related to digital advertising, yet there is a gap in understanding the unique consumer welfare implications of different types of digital ad targeting. This paper outlines key benefits, unintended risks, and potential for manipulation across the three major types of targeting: demographic/psychographic, behavioral, and geographic with the goal of understanding how to maximize the benefits of targeted digital advertising while minimizing harm to consumer welfare. Because regulatory issues are complex as digital ad targeting practices continue to evolve, we consider similarities and differences across ad targeting types. We also make suggestions for future research to address pressing issues of relevancy, transparency, consent, autonomy, and vulnerability in digital ad targeting, by examining intricacies in the collection and dissemination of demographic/psychographic, behavioral, and geographic consumer data. This research provides a framework to protect consumers in the digital age by informing industry and public policy regulatory practices.

Favorite Possessions Protect Subjective Well-Being Under Income Inequality

Rising income inequality is taking a toll on people's subjective well-being (SWB), and many commentators have implicated the role of material possessions, and thereby marketing, in this regard. Making a more nuanced argument, this research proposes that certain material possessions—namely, favorite possessions—can mitigate the detrimental psychological effect of income inequality on SWB. In support of this proposition, experimental data from nine countries (N = 3,687) and social media posts from 138 countries (N = 31,332) converge to show that, while SWB generally declines as income inequality increases, encouraging consumers to attend to their favorite possessions can mitigate the negative effect of inequality on SWB. This is because attending to favorite possessions reduces consumers’ tendency to make social comparisons related to material resources and wealth, which otherwise arise when income inequality is high. Consequently, even when they perceive high income inequality, consumers feel less deprived relative to others, which buffers their SWB. These findings have meaningful consumer welfare implications. In particular, one way consumers can feel happier with their quality of life in an unequal society is to avoid comparing their material wealth with that of others and instead attend to the material possessions most special to them.

Loan Amount versus Monthly Payments: The Effect of Loan Application Formats on Consumer Borrowing Decisions

Abstract Do different loan application formats affect consumer loan requests? Six studies show that when consumers are asked to provide a preferred monthly payment (MP) (vs. loan amount [LA]), they request different principal amounts. This is because these loan application formats differ in the scale-compatible information they bring to consumers’ mind. When LAs are elicited, consumers think of and request the cost of the expenditure they seek to finance. When MPs are elicited, however, consumers think of their monthly budget slack to construct and then request MPs they perceive to be affordable. For lower cost loans with a given term and interest rate, the MP (vs. LA) format results in larger principal requests. This effect reverses for higher cost acquisitions because individuals’ budget slack caps out around $500 per month. These studies provide insight into how consumer loan application formats can affect consumer borrowing, as well as the psychological underpinnings responsible for the effect. Theoretical, managerial, and consumer welfare implications of the findings are discussed.

Sustainability Agreements and Social Norms

Abstract Spurred by recent publications of National Competition Agencies, there is an ongoing debate on whether and, if so, how competition law and its enforcement shall give due consideration to concerns of sustainability, notably environmental sustainability. With respect to horizontal agreements, we define circumstances where sustainability concerns may indeed warrant a somewhat modified approach for the assessment of consumer welfare implications of a market related measure. We posit a feedback-effect on the willingness-to-pay for more sustainable products when a horizontal agreement leads other consumers to change their behavior. The underlying reason for this stems from the non-use value associated with sustainability and from its relation to social norms. In such scenarios, there can be a first-mover disadvantage for a firm who would unilaterally introduce a more sustainable product, which may justify horizontal cooperation. More generally, we argue that the construction of counterfactuals, in particular over a longer time horizon, may prove particularly challenging in a competitive assessment of sustainability claims. We also document the feedback effect arising from other consumers’ behavior with data that the Dutch Competition Authority gathered for its “Chicken of Tomorrow” case.

Review platforms as prosumer communities: theory, practices and implications

PurposeThis article aims to advance a new theoretical perspective on the basis of prosumption theory, namely, that online review platforms can be conceptualized as prosumer communities (and online reviews as prosumer-generated content). This perspective meshes with message tuning research to suggest specific mechanisms through which peer-to-peer prosumption takes place in online review communities. Overall, this article enriches and deepens theoretical understanding of prosumption behavior in the product review context and offers practical advice for inducing high-value, prosumer-generated content in online communities.Design/methodology/approachExploratory observations of current practices across a wide spectrum of review platforms were conducted. The observed platforms include independent review sites (e.g. Yelp) and review sites affiliated with e-tailers (e.g. Amazon), general review sites (e.g. Viewpoints) and product-specific review sites (e.g. Healthgrades), large-scale review sites (e.g. TripAdvisor) and review sites of a smaller scale (e.g. Judy’s Book) and review sites based in different geographic regions, including Australia (e.g. Productreview.com.au), China (e.g. Taobao), Europe (e.g. Reevoo), India (e.g. Zomato) and North America (e.g. Foursquare).FindingsTheoretical analysis suggests that high-quality review content is the result of collaborative prosumption characterized by three distinct value-adding processes: history-based message tuning, audience-based message tuning and norm-based message tuning. In-depth observations reveal that today’s review platforms are leveraging these value-adding processes to varying degrees. The overwhelming diversity of the observed platform features points to the need for more research on platform design and management.Research limitations/implicationsThis research identifies three distinct dimensions of review quality – novelty, relevancy and congruency – that can be systematically managed through platform design. The exploratory nature of this research necessitates follow-up work to further investigate how high-quality review content emerges in the historical, interpersonal and cultural contexts of online prosumer communities.Practical implicationsThe prosumption-inducing mechanisms identified in this research have major consumer welfare and strategy implications. First, they may lead to novel, relevant and congruent consumer reviews. Second, they may enhance the value of brand communities (which rely heavily on collaborative prosumption).Originality/valueThis research addresses two intriguing questions pertinent to marketing theory and practice in the digital era. First, how do high-quality reviews emerge on product review platforms (which consist of ordinary consumers)? Second, what constitutes high-quality review content and how can platform managers facilitate the collaborative creation of high-quality review content by ordinary consumers?

Consumer welfare, licensing, and exclusive dealing with vertically- and horizontally-differentiated products

We explore the existence of anticompetitive exclusive dealing when the downstream firm produces both vertically-and horizontally products. Our study shows that the licensing scheme has crucial ramifications for considering the possibility of exclusive dealing. For royalty licensing, the less the horizontal differentiation or the similar the quality of the two products is, the less possibility there is for exclusive dealing. However, under two-part tariff licensing, a pure fixed fee is preferred by a licensor, it is more likely to foster exclusive dealing. Moreover, we explore the consumer welfare implications and find that royalty licensing may prevent anticompetitive exclusion and lead to greater consumer surplus, which runs against the conventional wisdom that fixed fee licensing is socially desirable. In addition, royalty licensing can be favorable to the outside licensor if the licensor can commit at the beginning of the game.

The importance of being earnest: Mandatory vs. voluntary disclosure of incentives for online product reviews

Many sellers provide incentives for online product reviews to influence consumer perceptions and purchase decisions. Although relevant laws require disclosure of such incentives, compliance has been low as sellers fear that it may dampen consumer trust and product sales. We analyze product reviews on Amazon.com and find that reviews with mandatory disclosures by platform are associated with lower product ratings thus have a restraining effect on reviewers, while voluntary disclosures by reviewers lead to higher ratings, thus a potential upward bias due to moral licensing. Regression analyses based on propensity score matching show that in comparison with voluntary disclosures, mandatory disclosures have a positive effect on review helpfulness and sales, thus benefitting both sellers and consumers. These findings provide novel insight into the disclosure of incentives for online product reviews and have broad implications for e-marketing, consumer welfare, and public policy in the platform economy.

No longer green with envy: Objectifying and destroying negative consumer emotions

AbstractEnvy is a natural emotion that can occur to anyone. While envy can be beneficial in a way, it can also bring negative implications on self‐regulatory resources as well. A novel coping mechanism is proposed to help mitigate self‐regulatory failure elicited by envious feelings. The research demonstrates that envy loses its potency when such feelings are objectified by writing about them on a piece of paper, and then physically destroying them. Three laboratory studies (n = 110; n = 159; n = 174) are reported showing that participants who objectify their envious feelings and then destroy them (e.g., by shredding, cutting, tearing, or dissolving) rather than keeping them, exhibit enhanced self‐regulation, as evidenced by reduced acquisitiveness and less indulgent spending, as well as a greater willingness to volunteer. Theoretical and consumer welfare implications are discussed.

Advertising, incentives, and the upsell: how advertising differentially moderates customer- vs. retailer-directed price incentives' impact on consumers' preferences for premium products.

Many durable goods firms use price promotion strategies and advertising simultaneously to impact consumer preferences among vertically differentiated product offerings. In this research, we use a large secondary dataset of automotive purchases (N = 323,959) to investigate how advertising spending differentially moderates the positive impact of both customer- and retailer-directed price incentives on consumers’ premium level of purchase for vertically differentiated products. We find that higher advertising spending magnifies the positive impact of customer-directed price incentives on consumers’ preference for more premium purchases. In contrast, higher advertising spending attenuates the positive impact of retailer-directed price incentives on consumers’ preference for more premium purchases. Our work is distinct from previous research, which has almost exclusively focused on the CPG industry and the effects of advertising and price promotions on general demand metrics—instead of consumers’ preferences for premium products. Our work has important implications for practitioners and consumer welfare.

Economic hardship and neighborhood diversity: Influences on consumer well‐being

AbstractResidential neighborhoods shape consumers' well‐being in many profound ways. However, research has yet to adequately understand how consumers' perceived economic hardship interact with neighborhood's income and diversity to influence well‐being. We examine these effects in a diverse and densely populated Asian country of Singapore using four measures of well‐being: perceived quality of life, emotional well‐being, status consciousness, and consumer needs satisfaction. Results from a national sample of 1,445 respondents showed that consumers that were female rather than male, of immigrant origin rather than native born, representing an ethnic minority background, or had fewer economic challenges reported higher well‐being. The relation between economic hardship and consumer well‐being was moderated by neighborhood‐level socioeconomic status (SES) and diversity, such that more economic hardship predicted lower well‐being but only among residents in low SES or heterogeneous neighborhoods. Findings build on social comparison theory, and implications for consumer welfare and marketing practice are provided.

Sustainability Agreements and Social Norms

Spurred by recent publications of NACs, there is an ongoing debate on whether and, if so, how competition law and its enforcement shall give due consideration to concerns of sustainability, notably (though not exclusively) environmental sustainability. With respect to horizontal agreements, we define circumstances where sustainability concerns may indeed warrant a somewhat modified approach for the assessment of consumer welfare implications of a market related measure. We posit that the willingness-to-pay (WTP) for more sustainable products may depend on social norms to a greater extent than the WTP for products, whose valuation is based mainly or even exclusively on their immediate use value for the consumer. What makes the integration of social norms in WTP challenging, however, is the fact that a sustainability agreement can impact this social norm in that it pushes the market towards more sustainable products, which, in turn, may then change the observable behavior of other consumers. Such repercussions may increase individual WTP for sustainable products in the entire consumer cohort. Absent the sustainability agreement, market segmentation or capacity and resource constraints could hamper the emergence of such a new social norm. Also, with such norm-based externalities, there is a first-mover disadvantage, which deserves recognition in the assessment of sustainability agreements.

Recommenders’ Originals: The Welfare Effects of the Dual Role of Platforms as Producers and Recommender Systems

We study a model of strategic interaction between producers and a monopolist platform that employs a recommendation system. We characterize the consumer welfare implications of the platform’s entry into the production market. Upon entry, the platform biases recommendations to steer consumers towards its own goods, which leads to equilibrium investment adjustments by the producers and lower consumer welfare when the platform’s market size is large. Furthermore, we find that a policy separating recommendation and production or imposing unbiased recommendations is not always welfare improving. Our results highlight the ability of platforms to foreclose competition through the use of biased recommender systems.

Assessing the Impact of Brand Loyalty on Tobac-co Purchasing Decisions and Spending Patterns

This study examines how brand loyalty affects tobacco industry expenditure patterns and purchase decisions. The study's primary aims were to investigate the impact of brand loyalty on customer behavior, appraise the efficacy of tobacco corporations' marketing tactics, and analyze the consequences for public health and consumer welfare. A review process based on secondary data was utilized, combining empirical evidence from government publications, industry reports, and academic journals. Important discoveries show that brand loyalty significantly influences tobacco purchase decisions, customer preferences, and spending habits. Advertising, promotions, and sponsorships are marketing tactics vital in building brand loyalty and influencing consumer behavior. Brand loyalty questions its implications for consumer welfare and public health outcomes to counteract the negative consequences. As a result, evidence-based policies and regulatory measures are required. The significance of comprehensive tobacco control measures, regulatory interventions, and public health initiatives in promoting better choices and addressing public health concerns related to tobacco smoking is highlighted by the policy implications.